Thursday, November 28, 2019

A Common Sense View of Congress

Once a Congressman gets elected to Congress, they begin to worry about getting reelected. In today’s world, it takes about 6 million to run an election campaign. So, who do they listen to when in office? Answer: The special interest groups and lobbyist’s in Washington. Most of these groups want to increase their profits and or power over the populace.

Pharmaceutical lobbyist’s want to increase the profit margins of the companies they represent. The school teachers lobby wants to keep their union strong. No Congressman has any real incentive in lowering prescription prices or getting rid of teachers who can’t teach.

We have Congressmen that will promise the world to the voter, without the will to follow through on their promises, (it doesn’t get them cash for reelection). They will bring up items to vote for that have to do with protecting women and children or protect minority rights. There won’t be anything in there for the average voter to benefit from, like lower drug prices or lower taxes.

So, if a bill comes up to lower drug prices and that Congressman just got 50K from the drug lobby, he votes “yes” after he adds a rider on the bill to give free health care to non-citizens. Net effect, the bill goes down to defeat and he looks good.

The basic realism about Congress, is that if they do nothing, they have a very good chance of getting reelected. Do something, like irritate the wrong person, and you will be out of office. They try to pass bills that help the poor, women and children, car safety, oppressed groups etc. Any legislation like a tax break, sunsets in 5 years, so they have to vote on it again; looks good but that tax cut has probably been passed again and again over a span of 50 years.

So, when it is election time, the politician promises the voter the world, higher minimum wage, health care, free college. It doesn’t matter what it is, the man running for election knows it has no chance of becoming law. Why? There isn’t a lobbyist that represents the voter. There is no money put in their pocket for reelection by representing what the American voter really wants. The one thing that hides this concept is the unwillingness of the Democrats and Republicans to get together and pass the necessary bills by any more than a simple majority in one house and have it die in the other.

The special interest groups don’t have to bribe half of either party to get a bill passed. Bribing or giving “a campaign contribution” to only 10% will get the job done.

This is why President Trump doesn’t fit in. He doesn’t need the money, he earned his billions before he ran for President; the special interest groups can go fish. And of course, the special interest groups aren’t going to drop any dollars on a Congress that can’t perform as desired. The coffers of many a Congressmen are very lean from the lack of contributions. Blame it all on Trump, he isn’t going to sign anything into law that increases big businesses’ cut on the average citizen.

It is not business as usual; the special interest groups, the unions the lobbyists and entrenched bureaucrats want their power back. These groups want a President who will listen to them. They know what is right for America. “Make America great won’t get them reelected;” but a large election kitty just might. The problems they want to solve are the ones they create, not the ones they overlook.

So, as the holidays lumber along, remember that in the past, it didn’t matter who you voted for; the Republicans and Democrats never got much done in Congress. It used to be that Thanksgiving and Christmas dinner was all about football and the kids, now it’s a political argument. Admittingly the directions of the two parties are different, but for the first time in many years, one party is doing what they promised to do. And it’s not as impossible as it was perceived to be, before the election.

Remember your Congressman’s first priority is to raise money to get reelected. And you as an individual don’t have the coin to help him get that done. So, President Trump could be your next best chance to get something done.

This Blog in the past has been politically neutral on politics. But after seeing how the media is after Trump and his actions defy every doom prediction, I stand by the guy. The people in the media think that they speak for the whole country, and I disagree, they don't.

Happy Thanksgiving to all, enjoy the moment

Saturday, November 09, 2019

Government Retirement Theft in Progress

Let’s see, If I retire tomorrow, I can live off of the interest on my savings. What is wrong with that assumption? 40 years ago, the interest rates were 7 to 10 percent. And if you wanted to take some risk, you could get 18% on triple D bonds.

Remember the rule of 72 for interest rates? Divide the interest rate into 72 and that gives you the number of years it takes for your principle to double.

Take a retiree with one million in the bank right now. At 2% interest they are getting 20,000 a year in interest to live on. At 6% interest they would have 60,000 to live on. I can remember when I was starting my 401K, 8% or 80k was enough to do almost anything.

One could ask the question of why interest rates haven’t gone up; the government has been printing dollars like crazy. And there should be inflation. The only inflation I see is in health care costs, government services and property taxes.

Examine retirement plans like CalPERS that are claiming 6.7% returns on investments. They haven’t been getting that sort of return since the year 2000. The return for the last 15 years has been less than 4% if you average it out. The factor here is the rule of 72. Retirement plans pay through the nose if their rate assumptions are wrong long term. In this case, the state of California has to make up the shortfall. The trouble is, politicians can overlook the problem and pass it on to the next elected administration. Even 4%, doubles your principle every 18 years. A declared interest rate of 6.7 implies a doubling every 10 years. There is a problem here, that no one is pointing out. Of course if you are running for office in California, the problem is more than 4 years out, so there is nothing to worry about. keep quite and enjoy your term in office.

So, with 22 Trillion in national debt, what is the interest on that? At 4% it is 880,000,000,000. At 8% it is 1.7 trillion. Do you get the feeling that we as a country, can't do much more than pay the interest on the national debt? It kind of suggests that we will never pay the debt off. Which is a very interesting concept. Borrow until you can no longer afford to pay the interest demanded.

The problem here is that there is a mental separation between debt of government and obligations of citizens toward that debt. The government owes the debt, let the government pay it. Sounds logical for all the wrong reasons.

In a gold-based economy, most people hold very little gold. It is all spent paycheck to paycheck, no different than it is today. But savings are a different issue. In a gold economy, there is accountability for savings in the system. The irritating thing is that gold earns no interest. Investments currently make returns, but the returns are extremely low. The 1.5 percent interest return from the bank, won’t cover inflation, whereas a precious metals investment, probably will long term.

Many people may decide to put more of their savings into a non-productive investment like gold, as an insurance policy. Our current valid inflation rate is somewhere between 7 and 12 percent. This reflects the inflation created by our government spending. The reduced interest rate payed by the banks of 1.5 percent minus the inflation factor of say 10 percent reflects the taxes paid surreptitiously of those retired people with savings. A retiree with one million in the bank at 1.5 percent interest, is being taxed at (10-1.5) 8.5 percent, about 85 thousand dollars a year.

The tax is invisible. The interest rates are artificially low. The retirees do not understand the concept of interest manipulation by the Treasury Department. They are being robbed blind by government financial policy. Basically, there is so many printed dollars in circulation and very little demand for loans in relation to the size of dollars available. The Key thing, everyone is saving like mad to have a great retirement. This keeps inflation low, because it is not being spent.

At some point there will be a problem. Why save if there is no incentive? I think we are at that point and don’t realize it. Credit cards offer money back on purchases, and it is more than current bank interest rates. Something is upside down here. The logic is backwards. The real losers in all of this are the retirees. That is where most of the saved money is.

So the next time you hear that the price of gas went up or prescription drugs cost more. Think about it for one minute. The same gasoline sold for 25 cents a gallon 50 years ago. People will claim "That's just inflation." But as you move into retirement, the real world of government financing eats at your savings with lousy interest rate returns on your savings. And then there are the general yearly inflation price increases.

So what can we glean from all of this? If you are at retirement age, it might not be the retirement you expected. Growing old is not something that happens to government, it happens to people. The unfortunate thing is that health care problems are what pop up at retirement age.

The real problem is the government. The retiree is confused, trying to comprehend why the money he saved for retirement was not enough to satisfy his retirement dreams. And sadly it wasn't even his fault.